2017 (4) TMI 1461 - AT - Income Tax

Tribunal rules on business income treatment and interest levy appeal under Income-tax Act

Gartner Ireland Ltd Versus DDIT (IT) RG 3 (1) Mumbai

The tribunal ruled against the appellant in treating business income as royalty income under Section 9(1)(vi) of the Income-tax Act, citing consistent ... Erroneous treatment of Business Income as Royalty Income - DRP confirming entire payments received by the Appellant from customers in India during the captioned year are taxable as 'royalty' under Section 9(1)( vi) and under Article 12 of India - Ireland DTAA - HELD THAT:- The issue has been decided by this tribunal in assessee‟s own case against the assessee [2014 (1) TMI 1281 - ITAT MUMBAI] as held a customer of the present assessee made payment without deduction of tax at source u/s 195 of the Act - the payments made for online use of database was for licence to use said database and hence the consideration was royalty, liable for deduction of tax at source u/s 195 of the Act - Decided against Assessee. Levy of interest u/s. 234B - HELD THAT:- AO erred in charging the interest u/s. 234B as assessee being a non-resident, the Indian payers were obliged to withhold Tax at Source u/s. 195 of the Act and therefore the question of payment of advance tax and corresponding levy of interest u/s. 234B of the Act does not arise. - Decided in favour of Assessee. Issues Involved:1. Erroneous treatment of Business Income as Royalty Income2. Erroneous charging of interest under Sections 234B of the ActAnalysis:Issue 1: Erroneous treatment of Business Income as Royalty IncomeThe appeal was against the order of the assessing officer treating the entire payments received by the appellant from customers in India as taxable 'royalty' income under Section 9(1)(vi) of the Income-tax Act. The tribunal noted that the issue had been previously decided against the assessee in earlier assessment years. The appellant argued that decisions favoring the assessee had not been considered in the earlier decision. However, the tribunal found that the facts of those cases were different from the appellant's case. The tribunal held that since the issue had been consistently decided against the assessee earlier and the jurisdictional High Court had not reversed it, the appeal was decided against the assessee.Issue 2: Erroneous charging of interest under Sections 234B of the ActThe appellant challenged the charging of interest under Section 234B of the Act, amounting to a specific sum. The counsel for the assessee cited several decisions of the Hon'ble Bombay Court and Delhi High Court in favor of the assessee. The tribunal, noting that the revenue did not dispute this proposition, held that the assessing officer erred in charging the interest under Section 234B. It was reasoned that as the appellant was a non-resident, Indian payers were required to withhold Tax at Source under Section 195 of the Act, making the levy of interest under Section 234B unwarranted. Consequently, the tribunal partly allowed the appeal by the assessee.In conclusion, the tribunal's judgment addressed the erroneous treatment of business income as royalty income and the charging of interest under Sections 234B of the Act. The decision was based on the interpretation of relevant legal provisions, precedents, and the specific circumstances of the case, ultimately resulting in a partial allowance of the appeal by the assessee.